<\/p>\n
Jewellers have long used a simple mechanism to protect themselves against volatile gold prices \u2013 borrow the precious metal rather than buy it outright.<\/p>\n
It\u2019s a trick with origins in antiquity and used from the gold souks of Dubai to the bullion desks of India, allowing artisans to produce and sell their wares before settling the tab to align costs with revenue.<\/p>\n
If gold prices rise, the value of the rings and necklaces in the display case climbs with the debt. If they fall, both shrink together. The trade-off is interest on the loan.<\/p>\n
Now, a jeweller, an asset manager and a fintech firm are wrapping this age-old wisdom in a crypto token, offering investors gold that actually pays a yield.<\/p>\n
It\u2019s an example of how digital technology is disrupting traditional finance. Gold has always been a \u201cdead\u201d asset, a store of value that, unlike stocks and bonds, pays no dividends or interest to its owner.<\/p>\n
\u201cFor centuries, jewellers didn\u2019t borrow paper money to buy gold; they borrowed the gold itself,\u201d said Ivan Hoo, executive director at Singapore jeweller Mustafa Gold. \u201cWe are giving that ancient logic a sleek, synthetic upgrade.\u201d<\/p>\n
Mustafa has teamed up with FundBridge Capital which, in collaboration with tokenization platform Libeara, is offering investors digital tokens that track the price of gold.<\/p>\n
The money FundBridge gets for selling its \u201cMG999\u201d tokens is lent to Mustafa, who pays 2.5% interest on the loan. Mustafa uses the money to buy physical gold and make jewelry.<\/p>\n
Crucially, the loan is denominated in gold rather than cash. If Mustafa borrows $1 million, the debt is expressed as the amount of gold that sum could buy at prevailing market prices.<\/p>\n
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This means if gold prices rise, Mustafa\u2019s repayment obligation increases \u2013 but so too does the value of his jewellery. If prices fall, the debt shrinks along with inventory value. Matching costs and revenue helps stabilise margins.<\/p>\n
It\u2019s a synthetic version of borrowing physical gold to avoid price risk.<\/p>\n
Giving gold a yield<\/p>\n
There\u2019s an upside for investors too. They get exposure to gold but with the added bonus of yield derived from the interest Mustafa pays on the loan. After deducting management fees, FundBridge pays a 1% yield to token holders.<\/p>\n
There are numerous ways to gain exposure to gold without holding the metal physically, from exchange-traded funds to futures, options and mutual funds. In the digital world, Tether Holdings SA and Paxos Trust Company offer tokens backed by gold.<\/p>\n
But none of these directly offer investors a yield and some, such as ETFs, carry costs in the form of management fees, said John Bao Vu, chief portfolio manager at FundBridge.<\/p>\n
\u201cTypically, even though you get gold exposure, you get it in a negative carry sense,\u201d he said. \u201cWe thought about doing something one step further to reduce that negative carry. This is how we came up with the idea with Mustafa.\u201d<\/p>\n
Gold lending, or leasing, has become more institutional and complex. Jewelers can manage risk with a mix of tools including gold loans, forward contracts and hedging programs, but smaller retailers are more likely to rely on ordinary bank financing.<\/p>\n
For Mustafa, FundBridge is offering an alternative source of capital.<\/p>\n
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\u201cOur biggest source of borrowing is from banks,\u201d said Hoo. \u201cBut those loans are in US dollars, not denominated in gold terms. So this diversity of funding is good for us. It unlocks a fresh vault of capital from investors and meaningful diversification to how we fund the business.\u201d<\/p>\n
The price of gold has roughly tripled over the last four years as investors have sought safe havens amid heightened geopolitical uncertainty. Crypto firms have responded to that demand with more tokenised gold products.<\/p>\n<\/p>\n
FundBridge doesn\u2019t need to hold any gold to maintain the value of its token. Instead, it is backed by the contractual claim against Mustafa \u2013 the right to receive back cash equal to a specific amount of gold at whatever the market price is at maturity.<\/p>\n
To ensure the token is tied to the price of gold, the number on issue must maintain a prescribed ratio with the amount of outstanding loans.<\/p>\n
\u201cThe price risk gets transferred to the investor in the fund,\u201d said Vu. \u201cThey get the return (yield) as an upside while they take the exposure to gold-price risk. And the investors want to get exposure to gold.\u201d<\/p>\n
FundBridge has raised $15 million so far and hopes to reach $100 million initially. Working with a retailer like Mustafa, which requires a ton of gold a year, ensures quick deployment of the money.<\/p>\n
\u201cWe are simply bringing this practice of borrowing on gold terms into the digital age,\u201d said Mustafa\u2019s Hoo. \u201cWhat\u2019s old is new again.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#glitters #pays #year<\/p>\n","protected":false},"excerpt":{"rendered":"
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